How Passive is Your Index Fund?

Watch episode on youtube: https://youtu.be/p54lPItZSuY

Published May 2025.

Index funds are great investment tools to pursue your investment goals, especially if you can buy one that covers the global investment opportunity set, but that can be hard to do.

We take a look some various quirks around index funds, that highlight the reality that no index is truly passive and we're all faced with making active choices as investors.

It's important to remember that index providers don't have any interest in the needs of the end investor, it's the index manager who selects which index they will track and provide that tracking fund to the public, which is a commercial decision. 

This means investors are often presented with narrower options, that can tempt us to chase fads. And if an index fund doesn't take off, or something more exciting comes along, the index manager can change the index it tracks and leave investors making another choice about what to do with their money. 

None of this is to say that investors shouldn't use index funds, but that it's a good idea to find the broadest possible index available and remain disciplined pursuing your financial and investment goals.

Want to learn more about investing? Get our Book: https://www.amazon.com.au/Your-Investment-Philosophy-Protecting-Fraudsters-ebook/dp/B0BCPJ8BGC/  

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